Shanghai Scrap is withholding comment on Barack Obama’s economic stimulus in favor of compelling anecdotal evidence that – while the US Congress debates how to stimulate anything – the Chinese government is stimulating the US scrap industry.
Here’s the deal:
Late last year, with little notice, China’s State Reserve Bureau announced that – in an effort to stimulate its flagging non-ferrous metals sector - it would fund the acquisition of a large non-ferrous metal stockpile. Soon after, Yunnan Province – home to a thriving non-ferrous industry – announced its own strategic reserve to include 300,000 tons of aluminum, 100,000 tons of tin, 300,000 tons of zinc, 150,000 tons of lead, and 150,000 tons of copper (details on both programs, here).
Keep in mind that, in the wake of the economic crisis, and the collapse in China’s export manufacturing sector, the non-ferrous metals industry nearly collapsed due to a lack of demand and excess inventories purchased at record prices. As a result, raw material suppliers – including US scrap metal dealers and Australian miners – found that, in the space of two months, their biggest and best customer (China) simply disappeared.
Cut to this afternoon, and lunch with four mid-sized US scrap metal exporters (and one physician). I arrived expecting to hear market doom and gloom (despite a modest recovery in the markets), as well as harsh words for the large number of Chinese scrap buyers who had reneged on contracts during the October market collapse.
How wrong I was. Continue reading